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The merger between SunTrust and BB&T announced last week is a big deal, literally and figuratively. The deal merges two of the twenty largest banks in the U.S. to form the eighth largest bank in the country. The new entity, with over $430 billion in total assets, will enter the group of supersize regional banks that aren’t quite global Wall Street banks, but have national scale and the ability to dominate conventional commercial banking in their markets.

It’s by far the biggest bank merger since the financial crisis, and signals a potential return to the go-go years of bank expansion and super-concentration that occurred between the major bank deregulation bills in the 1990s (the 1994 Riegle-Neal Act and the 1999 Graham-Leach-Bliley Act) and the 2008 financial crisis. Even in that period — the era that put “too big to fail” at the center of the financial system — this merger would have been huge, one of the largest bank mergers ever by asset size.

But this isn’t a surprise to those who have been paying attention to the legislative and regulatory signals coming out of Washington. Last year, Congress passed S. 2155, a law that directed the Federal Reserve to ease up on regulatory requirements for large regional banks with up to $250 billion in assets and giving them an opening to relax regulations on even bigger banks. Supporters of S. 2155 repeatedly and misleadingly claimed that the bill was only about helping small and community banks thrive. However, as we, and others, pointed out last year, a likely effect of the bill will be reducing the number of community banks by encouraging consolidation and making it easier for big banks to swallow up smaller ones.

More recently, when the Federal Reserve proposed rules implementing the S. 2155 law, they did Congress one better. Their new proposal indicated that they would allow banks to grow up to $700 billion in size without triggering any heightened regulatory requirements. The Fed’s proposed rules also signaled a move from bank size as a focus for regulation to other, more abstract and likely more easily manipulated metrics of risk. As we said in our comment on the proposal, that’s a mistake. Bank size is the single best and clearest indicator of the power and importance of a financial institution. Every dollar of assets owned by a bank is a dollar of credit extended to the economy, which real people and businesses depend on.

AFR and many others have warned that current legislative and regulatory actions would lead to further consolidation in what is already an oligopolistic industry. Now it’s happening. Unfortunately, until and unless Congress and the regulators stop weakening the rules that govern the banking industry, we can expect to see more of the same.

The Financial Services Roundtable (FSR) “2017 Year in Review,”—an outline of their priorities and successes—is a remarkable catalogue of attacks on families’ economic security and rights, and on financial stability, in pursuit of still higher returns for the already profitable behemoths of finance. The “year in review” is full of deeply dishonest assertions that the policies they lobby for are good for the public, when they are in fact sought by the big banks, and opposed by groups representing consumers, seniors, veterans and service members, unions and communities.

FSR members include some of the biggest Wall Street banks, asset management, and credit card companies. The group was led from 2012 to 2018 by Tim Pawlenty—a former Majority Leader of the Minnesota House of Representatives and former Governor of Minnesota. FSR recently announced plans to merge with the Clearing House Association, which is owned by the world’s largest commercial banks—e.g., Bank of America, Wells Fargo, JPMorgan Chase, Deutsche, Citibank, HSBC, among others.

Here is a look at some of their highlights:

FSR helped lead efforts to get Congress to overturn the CFPB’s rule restoring consumers rights to take financial companies to court if they break the law. They claim that by doing so they “preserve consumer access to low-cost arbitration” that it would “ensure customers … can receive larger and quicker financial compensation from disputes with companies.”

Contrary to what they claim, the CFPB rule was designed to prohibit banks and lenders that break the law from stripping customers of their right to join together and hold them accountable in class action lawsuits. By blocking consumers from challenging illegal behavior in court, forced arbitrations impose secret proceedings in which the average consumer ends up paying the bank or lender $7,725. Moreover, without the option to join together in class actions, only 25 consumers with claims under $1,000 pursue arbitration each year. In contrast, class actions returned $2.2 billion to 34 million consumers from 2008-2012, after deducting attorneys’ fees and court costs. Restricting forced arbitration is key for individual consumers to band together and confront giant financial institutions who have cheated them. Companies like Wells Fargo or Equifax should not be above the law and consumers have a right to hold them accountable.

FSR advocated for the passage of comprehensive regulatory reform bills in the House and Senate. They claim “it is important to modernize financial regulations for banks of all sizes to ensure they are appropriately calibrated and are not unnecessarily holding back lending and impeding economic growth.” Specifically, the FSR advocated for, the Financial CHOICE Act, and Rep. Luetkemeyer’s regulatory modernization bill in the House—even more radical attacks on financial regulation than Chairman Crapo’s bill in the Senate (S.2155), which the FSR also endorsed.

In reality the CHOICE Act and Rep. Luetkemeyer’s bill were radical and far-reaching measures constructed out of the legislative wish lists of the biggest Wall Street banks and the worst predatory lenders as well as debt collectors and other unscrupulous financial actors. The bills the FSR pushed for harm consumers and threaten the stability of our economy in several ways, including by: repealing the Volcker Rule, which bars banks from acting like hedge funds and gambling with taxpayer-guaranteed funds; undermining the authority and funding of the Consumer Financial Protection Bureau, which has returned nearly $12 billion to 29 million people wronged by financial institutions; and by drastically weakening the oversight authority of the Federal Reserve over large banks. The bills backed by FSR also unleash predatory lending and remove mortgage-lending rules that protect homebuyers. The bills pushed by the FSR not only deregulate based on false premises but also impose numerous barriers to regulatory action that would tie the hands of regulatory agencies if they wished to take action to protect consumers and the public interest in the future.

S. 2155, the deregulatory bill just passed by the Senate, weakens rules on dozens of large banks and undermines consumer protections in numerous ways—including, exposing home buyers to financial exploitation and predatory lending, as well as enabling racial discrimination in mortgage lending. But these changes are still only a small part of the FSR massive deregulatory agenda. If the FSR has their way, S. 2155 will only be the first step in enabling the financial sector to increase its profits in ways that exploit consumers and endanger the economy.

FSR claims that by delaying the fiduciary rule they “continued our industry leadership to ensure consumers have access to affordable finance advice that serves their best interests.”

FSR worked to delay the Department of Labor’s (DoL) conflict of interest (or “fiduciary) rule for retirement investment advice. Without the fiduciary rule there are huge loopholes in retirement savings protections that make it easy for salesmen who present themselves as “advisers” to put maximizing their own compensation ahead of the best interests of their customers. In the absence of these protections, sellers of financial products can steer customers to investment products that pay benefits to the seller at the expense of the retirement savings of working families. The Department of Labor has demonstrated that ordinary savers lose tens of billions of dollars a year due to these conflicts of interest.

FSR led efforts to override a Department of Labor rule to allow government-run and mandated IRA plans at the state and local levels. FSR claims those plans “weaken consumer protections and threaten the retirement security of millions of Americans” and “would have allowed these mandated state and local-run plans to operate outside of the protections afforded by the Employee Retirement Income Security Act (ERISA).”

FSRs efforts actually stopped the progress of programs that would have made retirement more secure for millions of workers. As explained in a joint letter to Congress signed by over 50 organizations, while the regulation in question includes an exemption from the ERISA standards, “state-sponsored programs do not get rid of [those] responsibilities, but rather shift them to the programs themselves. The regulations therefore preserve accountability and ensure consumer safety, while alleviating the burdens that keep small businesses from offering retirement benefits.” Actually, FSR applauded the repeal of regulations making it easier for state and local governments to extended retirement savings programs to some of the 55 million workers without employer-sponsored retirement plans. Until the repeal of the rule got in the way, five states (California, Oregon, Illinois, Connecticut, and Maryland) were in the process of establishing programs that would have extended retirement security to 13 million workers, mostly low- and middle-income earners and minorities–only three of those states (California, Oregon, and Illinois) have moved forward with their programs.

FSR claims to have supported “strong federal data protection and consumer breach notification legislation to help ensure consumers’ important personal and payment information is not vulnerable to cyber hackers.”

Their misleading “push” for Federal intervention on this issue is actually about “enacting a preemptive federal breach notification law … [with] language that not only preempts state breach notification laws but also prevent states from enacting any future data security or privacy laws,” as noted by Ed Mierzwinski, U.S. PIRG Consumer Program Director. FSR’s letter calls for federal regulation that seems to ignore any non-financial harms that consumers could suffer as a result of a data breach or that would not “expand the range of information protected by the law as technology develops.” Breaches cause much more than the “identity theft and financial harm” for which FSR want to provide notice. For example, it can cause emotional stress, reputational damage, and even physical harm as the personal information of domestic violence victims could be used to track them down. Enforcement of the desired regulatory framework in their letter would exempt companies complying with the Gramm-Leach-Bliley Act (GLBA), even when these companies are not required to notify breach victims ever. The GLBA exemption includes all banks and many broadly defined financial firms—including Equifax.

FSR supported the passage and enactment of the Tax Cuts and Jobs Act, claiming the tax overhaul will “drive more jobs and increase paychecks for hardworking Americans.”

This bill only further rigs the tax code in favor of profitable Wall Street banks and the wealthiest 1 percent. The so-called “increase in paychecks” in reality has translated into a one-time bonus while the firms benefit from permanent lower taxes going forward. Companies like AT&T, Comcast, and Walmart are quietly laying-off hundreds of employees while others are gearing up to buy back their own shares to pump up their value. In fact, the FSR pushed the tax bill because of its huge tax benefits to Wall Street and Wall Street executives and its massive gifts to households in the top one percent of the income distribution—who stand to accrue an amazing 83 percent of the total tax cut benefits by 2027. Instead of promoting policies that would directly benefit workers—e.g. a higher minimum wage, strengthening labor standards and worker’s bargaining power—FSR’s President favors a “trickledown” approach to wage growth, ignoring that the almost forty-year-long trend of wage stagnation for middle- and low-wage workers refutes such approach.

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FSR’s 2017 yearly review lays out ‘progress’ on the wish list of some of the worst actors in the financial system, many of which are directly responsible for the last financial crisis and economic recession and have a history of cheating their own employees and defrauding consumers—e.g., JPMorgan, Bank of America, Citi, Wells Fargo, Santander, First Republic. Their 2017 highlights are a direct attack on consumer protections and the financial stability of our country.

The Consumer Financial Protection Bureau (CFPB)’s first enforcement action of 2017 will return more than $17 million to consumers who were deceived into purchasing unneeded credit reporting products. On January 3, 2017, the CFPB issued a consent order against TransUnion, LLC (TransUnion) and Equifax Inc. (Equifax) and their respective subsidiaries and affiliates for making false claims about the usefulness and actual cost of the companies’ credit score services.

TransUnion and Equifax are two of the nation’s three largest credit reporting agencies. They collect consumers’ credit information in order to generate credit reports and scores to be used by businesses to determine whether to extend credit. These companies also sell their own products directly to consumers, including credit scores, credit reports, and credit monitoring.

According to the order, TransUnion and Equifax told consumers that they would receive the same score typically used by lenders to determine their creditworthiness. But that claim was false: in fact, the scores they sold to consumers were rarely used by lenders. Since at least 2011, TransUnion has been using a credit score model from VantageScore Solutions, LLC (VantageScore) — a model not used by the vast majority of lenders and landlords to assess consumers’ credit. Similarly, between July 2011 and March 2014, Equifax used its own proprietary credit score model, the Equifax Credit Score, which was in the form of “education credit scores” and thus intended for consumers’ educational use and rarely used by lenders. In fact, the most widely used scores in lending are FICO scores.

TransUnion and Equifax also falsely advertised the price of their services. They told consumers that their credit scores and credit-related products were free, or in the case of TransUnion, cost only “$1.” In reality, the companies required consumers to sign up for either a seven-day or 30 day free trial period of credit monitoring, which then automatically turned into a monthly subscription costing $16 or more per month, unless the consumer had cancelled by the end of the free trial. This payment structure, called “negative option billing,” was not adequately disclosed in the companies’ ads.

Credit reporting agencies are required by law to provide a free credit report once every 12 months. They are not allowed to advertise add-on services until “after the consumer has obtained his or her annual file disclosure.” The CFPB found that Equifax violated that requirement.

The CFPB has ordered TransUnion to pay more than $13.9 million in restitution to affected consumers, and Equifax to pay almost $3.8 million, in addition to fines of $3 million and $2.5 million respectively. The companies have also been directed to truthfully and clearly describe the usefulness of their credit score products, and to obtain consumer consent before enrolling anyone in automatic billing.

Consumers who want access to their credit reports for free should go to the official source: www.annualcreditreport.com. They can stagger their requests by ordering one report from each of the Big Three credit reporting agencies (Equifax, Experian, and TransUnion) every four months, essentially obtaining “credit monitoring for free.” In addition, many consumers can now get a FICO score for free through the FICO Open Access program from participating credit card companies or nonprofit credit counselors.

This month the Consumer Financial Protection Bureau (CFPB) took action against three reverse mortgage companies for promising seniors a financial product that was too good to be true. The CFPB’s investigation determined that several of the claims the companies made in TV and print ads were not true. All three companies “tricked consumers into believing they could not lose their homes” with a reverse mortgage, CFPB Director Richard Cordray said in a statement accompanying the Bureau’s announcement of the settlements it has reached with Reverse Mortgage Solutions, Aegean Financial, and American Advisors Group, which is the largest reverse mortgage lender in the United States.[1]

A reverse mortgage is a special type of home loan for homeowners who are 62 or older, that converts a portion of the equity that has been built up over years of paying a mortgage, into cash. Homeowners do not have to repay the loan until they pass away, sell, or move out of the house, or fail to meet the obligations of the mortgage. These three companies promised consumers that their reverse mortgages would eliminate debt without any monthly payment obligation. In fact, a reverse mortgage is itself a debt[2] and consumers are required to make regular payments related to the home, including for property taxes, insurance and home maintenance.[3] Consumers can default on a reverse mortgage and lose their home if they fail to comply with the terms of the loan, including making such payments.

The CFPB settlement requires the three companies to make clear and prominent disclosures of the possible dangers of reverse mortgages in their future adds, and to pay a combined $800,000 in penalties

The CFPB provides information for consumers about reverse mortgages on its website.

— Veronica Meffe

[1] Consent Order in the Matter of American Advisors Group, No. 2016-CFPB-0026 (Filed Dec. 7, 2016), at 6 (“American Advisors Group Consent Order”).[2]Id., at 11.[3]Id., at 9.

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Access Funding, LLC (Access Funding) for operating an illegal scheme that took advantage of victims of lead-paint poisoning. “Many of these struggling consumers were victimized first by toxic lead, and second by a company that saw them as little more than income streams to be courted and harvested,” the CFPB said.

Access Funding is a structured-settlement factory company that purchases payment streams from personal-injury settlement recipients in exchange for an immediate lump sum that is usually much lower that the long-term payout. Forty-nine states have enacted laws, known as Structured Settlement Protection Acts (SSPAs), which require judicial approval to protect injured people from scams.

According to the CFPB’s November 21 lawsuit, Access Funding and its partners aggressively pressured consumers to accept up-front payment amounting to about 30 percent of the present value of the money due to them,[1] and lied to them by saying that once they had received a cash advance they were legally obligated to proceed with the transaction.[2] Knowing that many of the consumers in this case had suffered cognitive impairments from lead poisoning, the CFPB’s complaint alleges that the companies exploited their “lack of understanding” in order to lock them into these arrangements.

About 70 percent of Access Funding’s deals were done in Maryland, where it was headquartered. Many SSPAs, including Maryland’s, require consumers to consult with an independent professional advisor (IPA) before a court can approve such a deal. According to the lawsuit, Access Funding steered almost all its Maryland consumers to a single attorney, Charles Smith, who purported to act as the IPA, while having both personal and professional ties to Access Funding and its partners. Smith, who was paid directly by Access Funding, gave virtually no advice to the consumers.[3]

The lawsuit charges Access Funding with violating the federal prohibition on unfair, abusive, and deceptive acts in consumer financial transactions.[4] Reliance Funding, a successor company to Access Funding, was also named in the action, along with Michael Borkowski, CEO of Access Funding; Raffi Boghosian, Chief Operating Officer of Access Funding; Lee Jundanian, former CEO of Access Funding; and Charles Smith, the attorney who facilitated the scam. The CFPB is seeking to end the company’s unlawful practices and obtain compensation for victims, as well as a civil penalty against both companies and their partners. — Veronica Meffe

This week, the House Financial Services Committee will consider an extraordinarily dangerous bill that takes many of the worst ideas concocted by Wall Street lobbyists and their political friends and combines them into one toxic package.

The bill, the “Financial CHOICE Act” (H.R. 5983) is authored by House Financial Services Chairman Jeb Hensarling (R-TX-5), and it not only rolls back key portions of the Dodd-Frank Act, it also guts regulations that came before it. If passed, it would make financial regulation even weaker than it was even prior to the 2008 crisis. It also eviscerates the Consumer Financial Protection Bureau (CFPB) mere days after the CFPB fined Wells Fargo $100 million for widespread unlawful sales practices and ordered Wells Fargo to issue full refunds to all scammed customers. With banks continuing to abuse their own customers we need MORE accountability, not less.

This week, the Consumer Financial Protection Bureau (CFPB) turns five years old. AFR and a large number of consumer, civil rights, and community-based groups celebrated the anniversary, noting that life is better for American families and neighborhoods because the CFPB is at work fighting predatory lending and financial abuse. In addition to winning the praise of advocates, recent polling has shown that there is overwhelming, bipartisan support by the public for the work of the Bureau.

Senator Elizabeth Warren also delivered her own accolades to the Bureau in a video message that stresses the importance of its good work. In it, she notes that in just five short years, the CFPB has “ returned over $11 billion to consumers who were cheated on their mortgages, credit cards, checking accounts, and other financial products.”

That’s enough to end family homelessness in America

They’re able to make such astronomical amounts thanks in part to the many loopholes in our financial regulation. So-called “activist” hedge funds, for example, abuse lax securities laws to gain large stakes in public companies, and then demand cost-cutting, layoffs, and more debt. These moves enrich the hedge funds while often dooming the companies they acquire.

To top it off, hedge funds are costly investments whose performance often just mirrors the stock market overall, despite charging exorbitant fees. In 2015, those fees added up to a cool $13 billion in compensation for the 25 managers at the top of Reuters’ list.

$13 billion could end family homelessness for ten years

The Department of Housing and Urban Development (HUD) has said that it would take $11 billion over ten years to provide housing subsidies to 550,000 more families — an amount that could effectively end family homelessness, since in January 2015, HUD found that 564,708 people were homeless on a given night.

The many problems with the Investment Advisers Modernization Act

While Americans for Financial Reform and our allies are busy campaigning for closing loopholes that are special privileges for private funds, the Majority on the Hill is proposing to do away with even the limited existing reporting requirements to protect investors and increase accountability.

On May 17th, the House Financial Services Subcommittee on Capital Markets held a hearing to discuss a bill called the Investment Advisers Modernization Act of 2016. Far from actually modernizing the industry, the bill rolls the clock back to a time when private fund advisers operated in the shadows, without meaningful oversight. The bill would enable the exploitation of investors and reduce the information available to regulators to address systemic risk by rolling back key reporting requirements, and by interfering with the Securities and Exchange Commission’s ability to investigate fraud at individual firms. (For a full breakdown of the problems with this bill, please see AFR’s opposition letter).

One of the witnesses who testified was Jennifer Taub, a Professor at Vermont Law School and author of Other People’s Houses, a book on the foreclosure crisis. Professor Taub pointed out in her written testimony that the Investment Advisers Modernization Act could not only “undermine investor protection and trust, which could inhibit or drive up the cost of capital,” but would also “allow certain private equity advisers and other private fund advisers that have been exposed as lacking in recent SEC examinations to hide their tracks.”

Yesterday in the House Financial Services Committee, a new bill was considered that would weaken a key piece of financial reform. Speaking in support of the bill, Rep. Steve Stivers (R-OH) argued that this new piece of regulation was important because of “delicious cheeseburgers.”

H.R. 4166, the “Expanding Proven Financing for American Employers Act,” would create new exemptions from the rules in Dodd-Frank that require the financiers packing up new securities to retain a stake in their new products – rules put there to ensure that they have skin in the game.

The bill would allow financial firms that package up a product known as a “collateralized loan obligation,” or CLO for short, to escape the requirement that they hold onto a piece of the CLOs risk – a requirement to hold 5% of the total risk of the CLO, to be exact.

“I’m baffled by legislation such as this…the 2008 crisis was caused – in large part – by mortgage companies that originated loans to borrowers that had no ability to repay…To address this problematic “originate to distribute” model, Dodd-Frank included an important component known as risk retention, or “skin-in-the-game.” In essence, Congress told loan originators and securitizers to “eat their own cooking” before selling off their investments to others…H.R. 4166, takes us in the wrong direction, essentially exempting most securitizations of corporate loans from risk retention.

…CLOs are often used to finance private equity takeovers of companies through “leveraged buyouts.” The industry advocated for the exemption contemplated in this bill when they wrote letters to the regulators during the comment period.

Regulators heard their arguments, and rejected their proposal. In fact, regulators pointed out that the leveraged loan market may be getting overheated, and that “characteristics of the leveraged loan market pose potential systemic risks similar to those observed in the residential mortgage market.” …Mr. Chairman, when our banking regulators tell us there may be a bubble, I think we ought to listen.”

“Wendy’s International, a delicious food company based in my district…they have $246 million of collateralized loan obligations. Without that, they would not be able to make the delicious cheeseburgers you rely on every day.”

What Rep. Stivers doesn’t mention is that the reason Wendy’s needs so much borrowing, and is apparently pushing for weaker rules – and the reason they are already so leveraged that they wouldn’t qualify for the exemption for responsibly underwritten loans that regulators have already granted – is that they are doing a massive stock buyback which cashes out their shareholders. Although the buyback benefits current shareholders, it comes at the expense of leveraging up the company massively and threatening the future of franchisees. In other words, this borrowing isn’t for hamburgers, it’s to make billionaire shareholder Nelson Peltz richer to the tune of hundreds of millions of dollars.

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This blog is maintained by AFR as a forum for ongoing news and commentary about the fight for effective financial reform. Blog posts represent the opinions of their authors / posters, and do not necessarily represent the views of the AFR coalition or coalition members.